Comments on: Does Switching Wall Street Compensation to Stock Really Decrease Risk-Taking?

By: Weekend reading: Another tale of a woeful financial adviser

Weekend reading: Another tale of a woeful financial adviser — Sat, 16 Jan 2010 08:59:10 +0000

[...] Will switching to stock options decrease risk taking? – Darwin’s Finance [...]

By: Monevator

Monevator — Fri, 15 Jan 2010 17:36:48 +0000

I think it has to be better than compensating via cash, though I agree the whole thing with banks is bigger than just *how* they get their bonuses.

At the senior level, and with a long vesting time, there has to be more incentive not to let the company blow up.

But I’d question what it will achieve further down the ranks though. If I’m in Department A and Department B is up to financial black magic that eventually blows up and threatens the company, will the fact I’ve got outstanding options make me go over there and give him a piece of my mind?

I suppose it might foster a less gung-ho company culture.

By: Kevin

Kevin — Thu, 14 Jan 2010 16:28:37 +0000

Yeah the key is the vesting over time.

By: Financial Samurai

Financial Samurai — Thu, 14 Jan 2010 04:09:46 +0000

Darwin – Just one point you are missing. The stock compensation doesn’t give a retroactive strike. The stock compensation is more or less the latest price of when the stock grant is given!

What matters is how the stock performs over a 1, 2, 3, 4 year period, b/c that is the general vesting dates of the stocks given in year 0.

The real question is why the public gave BOA, Citi, and Wells $60 billion last Nov/Dec, so the banks can back back TARP (the public) to pay themselves big bonuses.